Can you protect yourself from a Tax Investigation?
While the government is cutting back on spending in almost all areas, one activity that has seen a significant increase in resources is tax investigations. Targeted with bringing in an extra £26 billion in the last financial year, HMRC is casting its net ever wider, using sophisticated data analysis techniques to identify cases suitable for tax investigation while also targeting on specific sectors, such as doctors, solicitors and plumbers. Combined with an often aggressive approach, this is making life very uncomfortable for a large number of businesses and individuals.
Here are some of the questions we get asked.
Could I be targeted?
Yes. Nobody is immune from tax investigation. HMRC’s systems can check you or your business against numerous parameters you’ve never even thought of. It’s impossible to be consistent with everything all the time. Then there are campaigns targeting specific sectors where HMRC feels there are opportunities to garner more cash. And of course there is always a random element.
My accountant makes sure my accounts are in order. Why would HMRC want to check them?
Unfortunately, using an accountant is no guarantee that you will not be selected for tax investigation. Using a professional accountant gives you peace of mind that your accounts are competently prepared, which reduces the scope for errors. But HMRC will not be able to see this without investigating them. In addition, however accurate and honest you try to be, there are always grey areas, where there is room for interpretation.
Surely they will go after bigger businesses, where there is more tax at stake?
Dream on. Bigger businesses may have a higher potential tax liability but they also have deep pockets and teams of lawyers to challenge a tax investigation from HMRC every step of the way. HMRC see small businesses as easier targets.
I’ve done nothing wrong, why should I worry about being investigated?
This is a frequent misconception. One client has just come through a gruelling VAT inspection. There was less than £500 to pay in the end but the case dragged on for almost 2 years, with the inspector at one stage claiming there had been an underpayment running into tens of thousands of pounds.
Although there was only a small amount of tax to pay, the overall cost to the business for the tax investigation was much greater. Fees for accounting support and a VAT specialist were covered by our Fee Protection Scheme, but there was no compensation for the management time wasted and loss of focus on the business.
Our Tax Investigation Fee Protection Scheme covers the cost of dealing with any HMRC investigations. For a small annual fee, this covers not only the cost of our time dealing with HMRC but also gives you access to a team of tax specialists who can handle the enquiry and negotiate with HMRC on your behalf.